Safety stock
Extra stock kept to cover uncertainty in demand or in supplier delivery, so that you do not run out.
What it means in business
Safety stock is the cushion above expected use. If demand jumps or a delivery is late, it keeps production and orders going. Holding more reduces the risk of stockouts but ties up cash and space, so the amount is a balance.
Example
A factory uses 100 units a week with a three-week lead time. It keeps an extra 150 units, because some deliveries have been a week late and some weeks demand has been much higher. This is an illustration of normal business use rather than a quoted case study.
How to use it correctly
Set it from how much demand and lead time actually vary for the item, review it as they change, and keep more for items whose shortage would stop production. Do not hold it for items that are easy to get at short notice.
Common confusion
Safety stock is not the same as the stock you expect to use before the next delivery. It should not be used up in normal running: if it is, the reorder point is set too low.
Related glossary terms
Written on 24 October 2026 for lamp. Confirm the current rules with the official source or an adviser before relying on it.